Yao Wei, a Hong Kong-based economist at Societe Generale SA, comments on the widening of the yuan’s trading band by the People’s Bank of China.
“This is a small step but a big gesture of China’s commitment to liberalize its exchange rate. Recently China has clearly accelerated the pace of capital account openness.
“The change essentially gives more say to the market to determine the path of the yuan. Given the market expectations indicated by the currency forward curves, the yuan will probably continue fluctuating around current levels for some time, but with more volatility.”